US Dairy Industry Hit in Trade War

The U.S. export of dairy products have been considerably suffering from the escalating trade disputes between the United States and China, the world’s top two economies.

If the conflicts of two sides continue to worsen, the United States would lose over 1 billion U.S. dollars as well as a lot of farmers, said Jaime Castaneda, senior vice president of the U.S. Dairy Export Council in a recent interview with China’s official media Xinhua.

With years of decreasing milk consumption at home, the U.S. dairy industry has seen increasing dependence on foreign markets. But now the trade protectionism resumed by US has badly stung the export-oriented industry.

Since the US President Donald Trump announced to impose new tariffs on many countries, including China, Mexico and Canada, all of which are major importers of American milk products, retaliatory tariffs have been successively spawned on US goods.

The counterattacks from Mexico and China, two vital trading partners of US, have caused severe damage to American dairy farmers and companies, said Castaneda, who has nearly 20 years of experience in the dairy industry.

Mexico, taking in 28% of all U.S. dairy exports, has recently levied as high as 25-percent tariffs on American cheese exports as a fightback against the U.S. steel and aluminum tariffs. China has also announced additional tariffs on US exports of milk, butter, cheese and other products.

If those tariffs hold up, it may be more expensive for US farmers and processors to sell dairy to Mexico and China, bringing them more competition in other markets.

According to the U.S. Chamber of Commerce, the Mexican tariffs could influence American dairy products worth as much as $578 million, while China’s tariffs could affect 408 million dollars of cheese, whey and other products.

We have already felt the impact and see the milk futures drop “in a significant way,” Castaneda said.

“We are calculating that farmers may be losing between 1 billion to 2 billion U.S. dollars just in the next few months,” he said, adding if the trade conflicts won’t ease soon, “it’s gonna to be a significant, significant problem for us.”

To express what they are concerned about, more than 60 enterprises and organizations representative of the country’s dairy farmers and cheese producers wrote a letter to Trump last month, urging the government to reconsider the imposition of new tariffs on Mexico.

Castaneda said that the Trump administration’s trade policy may benefit domestic steel and aluminum industry, but the agricultural prices will undoubtedly be significantly impacted.

“You cannot choose one industry over another. We are manufacturing too,” the expert argued.

U.S. dairy farmers and firms have already spent a considerable amount of money in their overseas expansion, and it will be very hard to reverse the trend.

“China has been an amazing market and an amazing partner,” Castaneda said.

The United States was estimated to output 577 million dollars worth of dairy products to China in the past year, a large year-on-year increase of 49 percent.

Over the past few years, the U.S. dairy industry has evolved and changed significantly amid a shrinking domestic market and a growing demand from overseas consumers.

In March this year, the exports for the U.S. dairy industry hit a new high, up from 5 percent of its total production several years ago to 17.3 percent.

“We are aiming at reaching 20 percent in the next five years,” Castaneda said.

However, the goal is highly variable and at stake considering the current situation.

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